Analyst: Microsoft to lower Xbox One price tag for 10 year console cycle

Trent Nouveau, 21st June 2013

Earlier this week, Microsoft abandoned a slew of unpopular and controversial policies which severely limited the use of its Xbox One and accompanying games. Fortunately, even more changes are apparently afoot in Redmond, as Microsoft may very well decide to lower the price of its next-gen console sometime in the near future.

"The focus will shift from Microsoft's onerous policies to the price differential between the Xbox One (at $499) and the PS4 (at $399). The differential is due to the inclusion of Kinect (a high definition camera with a microphone array) with every Xbox One; Microsoft intends to offer a more robust hardware bundle than Sony will offer, and Microsoft is convinced that consumers will ultimately appreciate the value proposition presented by Kinect," Wedbush Morgan analyst Michael Pachter wrote in an industry note obtained by GameIndustry International.

"Microsoft has not done a particularly good job of communicating the value proposition to consumers, but [the recent] announcement will remove an impediment to the company's ability to get its message across. We are confident that with six months of focused messaging, Microsoft can fully level the playing field with Sony, and we expect the Xbox One to sell as many units as the PS4. If we are wrong, we think that Microsoft is prepared to lower price next year."

Pachter also noted that the next-gen console cycle will likely last a decade.

"While Microsoft still intends to offer digital downloads of new games on the same day they are released on DVD, the removal of restrictions on transfer makes it far more likely that the large number of consumers who value used games as currency will continue to buy them in physical form," he continued.

"Ultimately, we think that no more than 50 percent of game sales will be in digital format, suggesting that GameStop's used game business could be healthy for many years.
Measuring what is currently sold in packaged form, I think that there will be a migration of 50 percent to digital in the next 5 - 10 years for Xbox One. It's a harder call on PS4, it's not as online friendly (yet)."